Misys, the software group, has opened its books to “certain parties” interested in taking it over. The decision was made by an independent committee, set up to review the takeover bids, led by Sir Dominic Cadbury, the non-executive chairman of the company.
It was on 9 June that Misys first said that it had received a request from members of senior management about making a possible offer for the company. The company had ended talks to sell its financial support services arm Sesame in March, and instead aimed to restructure its business as it struggled with flat profits. It is thought to be selling non-core activities to focus on key areas. This first management buyout bid is understood to have been led by Kevin Lomax, the chief executive, former chairman and a founding investor.
Once it became known that Misys had cleared Lomax to make a bid, more offers began to flood in. SunGard, the American financial data group, and a rival of Misys, is understood to be part of a consortium led by Silver Lake Partners, a specialist private equity technology investor, which has registered an interest in Misys. Private equity groups Permira and General Atlantic, advised by Dresdner Kleinwort, are thought to have submitted a joint bid and to have had talks with Mr Lomax. Interested parties had been required to submit indicative offers by July 12.
The most unusual bid comes from three former directors, Ross Graham, Mike O’Leary and John Sussens. The trio, all with extensive experience from different areas of the firm, have planned what is being described as a “management walk-in”. They believe that the company could deliver greater value to its investors were it to remain independent, well above the current share price. They are being advised by Bridgewell, the niche investment bank. If they succeed, they plan to break the group into its constituent parts, including banking, healthcare and support services for financial advisers, through sales or demergers. If they achieve big value, they could get an option over 2% of the company. Some investors believe that the buyout proposal being put forward by Lomax is designed to get Misys on the cheap, and that this plan will give shareholders an alternative option.
However, according to The Times, big shareholders in Misys would opt for a sale of the company over a last-minute proposal for a “management walk-in”. Apparently several leading investors in Misys said that they would rather cash in their stakes than risk the proposal from three former directors, for there are concerns that a break-up of the group would not release more value. One shareholder said that while a firm cash offer would be his “first preference”, this would have to be priced at a sufficient premium to the market price. There are also concerns that the trio have not indicated whether they too have a takeover price that they would be willing to accept.
Despite the preference for a takeover offer at the right level, shareholders were largely supportive of the structure of the former directors’ proposal and said that the existence of an alternative for shareholders was to be welcomed. The proposal has helped speed up the protracted process and has invigorated the auction. It has also helped balance the power that the figure of Lomax has. If interested consortiums were afraid of bidding without the experience and influence of Lomax on their side, they now have the option of three experienced alternative managers to smooth any transitions. There is also speculation that Ivan Martin, the former head of Misys’ banking division, may be involved in the bidding.
Shares closed on Tuesday at 243p, which City analysts believe is close to the maximum bid. Gareth Evans, an Investec Securities analyst, believes that the executive team “may well still be in the running” because the recent statement was issued by the committee not the board. “The price may be more likely to approach 250p, but we would be surprised to see a true ‘knockout’ bid,” he says. Credit Suisse believe that the best breakup value for Misys is 245p, and that the most likely outcome is the buy-in, with former directors breaking up the company for sale. Misys is due to report its annual results on Thursday.